Infosys is poised to kick off its largest-ever share buyback from November 20 to November 26, putting forward ₹1,800 per share. This strategic move showcases the company's financial robustness and dedication to its shareholders. The ₹18,000-crore initiative eclipses the previous ₹9,300 crore buyback executed in 2022.
The scheme covers 10 crore fully paid shares of ₹5 each, amounting to 2.41% of Infosys' total equity. Following this announcement, Infosys shares experienced a nearly 4% increase, hitting ₹1,541. This surge supported the Nifty IT index, which climbed almost 3% to 36,970.85.
Understanding Share Buybacks
A share buyback occurs when a corporation repurchases its own shares from existing owners. The offered price of ₹1,800 per share represents a premium of over 19% from the price noted at the announcement in September.
Categories of Entitlements
This buyback is divided into two categories: small shareholders and the general category. Small shareholders, defined as those holding shares worth up to ₹2 lakh, are granted a 15% reservation, ensuring favorable entitlements. Eligibility was determined as of November 14. The buyback ratio for small shareholders stands at 2:11, while the general category ratio is 17:706.
Benefits for Retail Investors
Promoters and promoter groups, who have a 14.3% stake in Infosys, have chosen to opt out of the buyback process. This decision is beneficial for public shareholders, particularly retail investors, as it enhances their acceptance ratios and could increase their effective gains.
Co-founders and family members collectively own around 4% of the company. By not participating in this buyback, they express their confidence in the company’s long-term prospects, potentially uplifting investor sentiment across the IT sector.
Financial Aspects and Tax Implications
The proceeds from the buyback will be taxed as dividends in the hands of shareholders. While high-tax bracket investors might find selling shares on the market more advantageous, those in lower tax brackets could reap benefits from tendering their shares. The buyback will be fully financed through Infosys’ internal cash reserves, indicating robust free cash flow and solid financial stability.
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